Sin tax law amendment breezes through House panel

RG Cruz, ABS-CBN News

Posted at Dec 06 2016 09:10 PM

MANILA - A tax measure that seeks to keep a unitary tax rate for tobacco breezed through the ways and means committee and hit the plenary of the lower House on Tuesday.

House Bill 4144 seeks to amend Republic Act 10351, also known as the Sin Tax Reform Act, which introduced higher excise tax rates for alcohol and tobacco products and signaled the move towards a unitary rate system by next year, and indexed the tax rate to inflation by increasing it gradually to 4 percent annually.

The bill was authored by ABS party-list Rep. Eugene Michael de Vera and sponsored on the floor by ways and means committee chair Dakila Carlo Cua.

Under the current law, cigarettes with a net retail price of P11.50 per pack were taxed P25 per pack. Cigarettes higher than P11.50 will be taxed P29 pero pack. 

By January 1, 2017, these two-tiers will converge to a unitary tax rate of P30 per pack.

The bill's explanatory note said moving toward a unitary tax in 2017 is aimed to further level the playing field in the cigarette industry and promote competition.

However, concerns have been raised that when the unitary excise tax rate is imposed next year, this would displace more local tobacco farmers especially those in Northern Luzon.

The bill justifies the move by saying that the uniform tax rate would make consumers prefer buying higher-priced cigarettes because the price disparity between the high-priced and low-priced cigarettes would be minimal. 

Amid the competition, cigarette manufacturers may also opt to import tobacco leaves instead of purchasing the locally grown tobacco leaves considering that tobacco leaves grown abroad are of better quality, thus diminishing the demand for tobacco leaves produced domestically especially for the lower grade tobacco types such as Grade D, E, F-1, F-2 and R. These lower classified leaves comprises 2 percent to 30 percent of the leaves in one single stalk of cigarette.

The bill would increase the tax rate for the lower tier to P32 per pack and the higher tier to P36 per pack. The incremental revenue is expected to increase even more with much higher excise tax rates which maybe used to fund more social and vital infrastructure projects of the national government.

According to Cua, the debate over one-tier and two-tiers has been going on for the longest time, and there has been no decision on which is superior over the other. He said the amendment will give the government more revenues.

Deputy Speaker Pia Cayetano, meanwhile, appealed to the plenary to give the current law a chance, explaining that the current law has the twin aims of raising revenues and protecting the health of the people.

Cayetano opined that the two-tiered system being proposed would make the cheapest cigarettes available to everyone at a very cheap price, including children.

Cayetano asked that the bill be remanded to the committee to allow a discussion of the health benefits of the proposed amendment. Cayetano said the ways and means panel did not tackle the health benefits.

Under the Constitution, all tax measures must emanate from the House.